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Incorporation

Setting up a company in France

When setting up a company you may want to consider these factors:

  1. The industry and type of business

  2. Nationality of the headquarters/individual(s)

  3. Presence of existing trade agreements or relationships

Your Options

France is a large economic center in Western Europe, and according to Company Formation France is one of the most powerful economies due to its size, location, and membership in many European organizations. It is the world’s fifth largest economy.

Population                    66,000,000

Capital                           Paris

National Language    French

Time zone                     UTC+1 (summer: UTC+2)

Calling code                +33

Currency                      Euro (EUR) :: USD$1 = approximately 0.90EUR

Nominal GDP             $2.470 trillion ($38,458 per capita)

Domain                        .fr

The government is considered to be generally supportive of entrepreneurs coming to France to open companies. According to the US site, Export.gov, France is considered to have a stable and reliably safe business climate, with its government devoting significant resources to attracting foreign investment, through policy incentives, marketing, its overseas trade promotion offices, and investor support mechanisms. The country has a modern business culture, sophisticated financial markets, strong intellectual property protections, and innovative business leaders.

Subsidiary Company (filiale)

 

A subsidiary is an local independent legal entity formed under French laws, which can be governed by its own bylaws, and although it can be owned by a foreign parent company, it does not hold the parent liable for its debts and obligations.

A subsidiary is the most common company form used by foreign investors wishing to invest in France on a long-term basis.

A.  Requirements/Restrictions

Like with most countries, incorporating a subsidiary company in France provides its own legal entity status, meaning the foreign company is not responsible for the French subsidiary’s debts or liabilities.

According to incorporation service Company Formation France, the most common form of subsidiary is the private limited liability company, known as the French SARL (societe a responsabilite limitee) and must be formed by at least two individuals or corporate bodies, with at least 1 euro as minimum share capital. The maximum number of shareholder cannot exceed 100, and their liability is limited to their amount contributed to the capital. The manager must be a French resident, or from the EEA, otherwise they will require a residence permit (skills, expertise and business activity) and a long stay visa.

B.  Advantages/Disadvantages

The Practical Law guide cites the main advantages of a subsidiary as its as a separate legal entity allowed to conduct full commercial operations, where the parent company will not be held liable for the debts of the subsidiary. Meanwhile according to Company Formation France, the French tax system is advantageous for subsidiaries as due to the many treaties signed by France, many tax exemptions can be granted. Withholding taxes for dividends paid to a company situated in an EU country are also exempt: if the company owns at least 10% of the subsidiary’s capital.

 

The Practical Law guide notes that a disadvantage of the subsidiary is that it is subject to French accounting requirements and tax, and being a separate legal entity means any losses cannot be offset against the parent company’s profits. Also, Company Formation France notes that if the company is located outside the EU, the withholding tax on dividends is 25%.  Exemptions or lower taxes may be granted however, due to the double tax treaties signed by France.

C.  Registration Steps

1.  Check Availability of Name

According to the Doing Business Project, it is not legally mandatory to check a proposed company name before registering a company. However it is recommended as legal problems may occur if the name conflicts with an existing company or trademark. The name can be checked online for free. More detailed searches can optionally be submitted, but these incur fees (EUR 40 for three classes and EUR 400 for all classes).

The name can be checked at the Institut National de la Propriété Industrielle (INPI) website. If the name is unique, a certificate of reservation will be issued and the entity can proceed with the rest of the operations.

Time: instant (online)

Cost: no charge (unless conducting the more detailed searches)

2.  Open Commercial Bank Account

A bank account must be opened and the minimum share capital must be deposited (37,000 EUR in case of a joint stock company, or any amount for a limited liability company).

The bank must issue a certificate stating the amount that was received, as it will be necessary for the following registration steps.

Time: 1-8 days

Cost: no charge (aside from requiring a minimal deposit)

3. Establish an Office

The QuickGuides series by Ashurst reports that a company is required to establish its own or a serviced office in France.

The guide also reports that commercial leases generally have a minimum duration of nine years though the usual length is 12 years. As tenant you get a right to break every three years. Usual three months’ rent deposit is required, and/or a bank or parent company guarantee.

Time: no registration procedure (but paperwork for lease, etc may take several weeks)

Cost: no registration cost (deposit and agent fees etc will however apply)

4.  Appoint an Auditor

Hiring an accountant may be required before establishing a company in France. The Ashurst QuickGuide states that this is done by choosing a statutory auditor, and receiving a receipt of the letter of acceptance of duties. A guide on auditor appointment by Action Expertise states that the auditor should be named in the articles of association upon the foundation of the company.

The company must appoint both a statutory auditor and an alternate auditor, who would replace the statutory auditor if it is unable to finish its tenure. The statutory auditor has to be registered with the Institute of French Auditors (“Compagnie régionale des commissaires aux comptes”).

Statutory auditors may be optional in certain SARL or SAS depending on the size of the business or whether the company is part of a consolidated group of companies.

Time: n/a

Cost: n/a

5.  Publication of Incorporation in Official Journal

The next step is the publication of the French subsidiary’s incorporation in the official journal.

The Institute of Chartered Accountants in England and Wales (ICAEW) identifies the Bulletin Officiel D’Annonces Civiles et Commerciales (BODACC) as the official bulletin of civil and commercial notices for the filing of accounts and other statutory information to be published in.

Time: 1 day (can be done at same time as previous step)

Cost: EUR 5.49 per line of 40 characters (e.g. around EUR 165 for 30 lines)

6.  Register Company and Register for Tax, Social Security and Insurances

The Centre de Formalités des Entreprises (CFE) in France is a single body that deals with registration for tax authorities, social security, labor and health insurance, which is mandatory for all entities that will perform business in France.

Prior to registering, the appropriate company formation documents such as articles of association must be drafted and notarized by a notary from the foreign parent country. The articles must state the reason of opening a subsidiary, the manager’s responsibilities, the name and the address of the subsidiary and other provisions.

According to Company Formation France, the company must then file a request for registration and submit necessary documents (including articles of association, a letter from the bank confirming the opening of an account, the decision of opening a subsidiary and a proof that the specific Gazette has received a notification regarding the establishment of the new company, the structure of the entity and its purposes, the addresses of the managing board and the chosen address of the company). The CFE sends the necessary information to every office and authority in order to be registered.

AngloInfo Paris also specifies that the CFE covers the following registrations:

1. INSEE, which registers the company with the Répertoire National des Entreprises (RNE) and allocates a SIREN number (business reference number used by French administrative offices) and a SIRET number (quoted in dealings with local social services, tax offices and unemployment office) and the NAF code (an activity code that classifies the type of business in France – also called APE number) .

2. Tax services incl. VAT registration.

3. Social security services (URSSAF, Régime Social des Indépendants (RSI), professionals’ pension scheme).

4. Registration with the Registre du Commerce et des Sociétés (RCS).

5. The Caisses Socials and Inspection du Travail if there are to be employees at the start of trade.

As a result, the newly formed business will receive the SIRENE (Systéme Informatique pour le Répertoire des Entreprises), SIRET (Systéme Informatique pour le Répertoire des Etablissements) and NAF (Nomenclature des Activitees Francaises) numbers. The Trade Register (Registre du Commerce et des Sociétés) issues the “K-bis extract” (Extrait Kbis) which is the certification and identification document of a French company.

Time: 10-15 days

Cost: EUR 84.24

7.  Stamp Company Books at Commercial Court

The last step of setting up a subsidiary in France is buying the company books and stamp them at the clerk of the Commercial Court. These are specialized accounting books that must be purchased at the Commercial Court or authorized stores.

Time: 1 day

Cost: around 45 EUR

Branch Office (succursale)

The Practical Law guide describes a branch as falling between a subsidiary and a liaison office, as it is a permanent establishment that can conduct commercial activities and deal with third parties, but is not separate from its parent company.  A local branch is most commonly used by foreign investors wishing to invest in France on a long-term basis and keep an eye on day-to-day management, since the branch has no independent legal personality.

A.  Requirements/Restrictions

A foreign branch office is an extension entity of the foreign parent-company. Like in many countries, a branch office in France does not have an independent legal status, and is considered under the direct control of the foreign company headquarters. This means that the parent company is liable for any debts and liabilities obtained by the branch.

The name of the branch must be identical to the foreign company’s name. However, its trading name may be different. For instance, the term “France” may be added to the branch name.

The branch will have to indicate on its invoices, orders, price lists, advertising documents, correspondence and receipts the name of the foreign company, its corporate form, its registered address and its registration number and place of registration in France, and VAT tax registration number.

B.  Advantages/Disadvantages

According to Company Formation France, a primary advantage for branches is that the parent company can support the branch more easily if the branch encounters financial issues. The Practical Law guide states that, aside from the freedom to conduct commercial activities, the primary advantage of a branch is that, not being a separate legal entity, means the subsidiary’s losses can be offset against the parent company’s profits.

 

The Practical Law guide reports that disadvantages of a branch include being subject to French accounting requirements and French tax law, and that by not being a separate legal entity, it means that the parent company can be held liable for the debts of the subsidiary.

C.  Registration Steps

1.  Appoint a Representative

The branch must have a person entitled to act on behalf of the company.

The representative does not need to be separately registered, but needs to be reported with filing company documents at the trade register in the next step. Thus, it should be formally decided upon within the company before registering the branch, with appropriate company declarations being made and signed.

If the representative of the branch is not an EU or EEA citizen they will also require a temporary resident permit (carte de séjour temporaire) authorizing the manager to exercise a professional activity in France or a French resident permit (carte de résident).

Time: n/a

Cost: n/a

2.  Establish an Office

The branch must have an office arranged before it can register with the trade and companies register. According to the French Commercial Court, examples of suitable evidence include copy of the commercial lease, the contract with a company, recent electric bill (EDF) or telephone receipts, etc. These documents should be included when registering in the next step.

Time: no separate registration procedure (but paperwork for lease, etc may take several weeks)

Cost: no registration cost (deposit and agent fees etc will however apply)

3.  Register the Branch

A foreign company must register its branch in the Trade and Companies Register (Registre de Commerce et des Sociétés), within 15 days of its opening. The French Commercial Court website specifies that it can be done either at a centre for administrative formalities (“Centre de Formalités des Entreprises”) or directly at the registry office (“le greffe”) of the commercial court.

In order to set up a branch of a foreign company, the following documents must be submitted (translated into French by an authorized translator):

  • Constitution and the certificate of incorporation of foreign company,
  • Registered office (e.g. lease agreement, registered office agreement, etc),
  • Appointment of an individual as representative of the branch in France.
  • Minutes of the board meeting of the foreign company, deciding upon:
    • Establishment of the branch;
    • Activities to be carried out by the branch;
    • The date of commencement of these activities;
    • The business name of the branch;
    • The location of the branch

Time: 10-20 days

Cost: 40 EUR

4.  Register the Company and for Tax, Social Security and Insurances

The Centre de Formalités des Entreprises (CFE) in France is a single body that deals with registration for tax authorities, social security, labour and health insurance, which is mandatory for all entities that will perform business in France.

Prior to registering, the appropriate company formation documents, such as articles of association, must be drafted and notarized by a notary from the foreign parent country. The articles must state the reason of opening a subsidiary, the manager’s responsibilities, the name and the address of the subsidiary and other provisions.

The company must then file a request for registration and submit necessary documents (including articles of association, a letter from the bank confirming the opening of an account, the decision of opening a subsidiary and a proof that the specific Gazette has received a notification regarding the establishment of the new company, the structure of the entity and its purposes, the addresses of the managing board and the chosen address of the company). The CFE sends the necessary information to every office and authority in order to be registered.

AngloInfo Paris also specifies that the CFE covers the following registrations:

  • INSEE, which registers the company with the Répertoire National des Entreprises (RNE) and allocates a SIREN number (business reference number used by French administrative offices) and a SIRET number (quoted in dealings with local social services, tax offices and unemployment office) and the NAF code (an activity code that classifies the type of business in France – also called APE number) .
  • Tax services incl. VAT registration.
  • Social security services (URSSAF, Régime Social des Indépendants (RSI), professionals’ pension scheme).
  • Registration with the Registre du Commerce et des Sociétés (RCS).
  • The Caisses Socials and Inspection du Travail if there are to be employees at the start of trade.

As a result, the newly formed business will receive the SIRENE (Systéme Informatique pour le Répertoire des Entreprises), SIRET (Systéme Informatique pour le Répertoire des Etablissements) and NAF (Nomenclature des Activitees Francaises) numbers. The Trade Register (Registre du Commerce et des Sociétés) issues the “K-bis extract” (Extrait Kbis) which is the certification and identification document of a French company.

Time: 10-15 days

Cost: EUR 85

5.  Open a Commercial Bank Account

A French bank account is not required for Branch Offices, but is still recommended. A branch is not a French company so is not subject to minimum capital deposits, although the bank may still require a minimum deposit to open an account. SEDI Group advises that the bank will want to see a certificate of domiciliation or lease, and a corporate profile concerning the Branch’s activity in France.

Time: 15 days

Cost: no charge (aside from requiring a minimal deposit)

6.  Stamp Company Books at Commercial Court

As a branch office is subject to French tax and accounting laws, it must by company books and stamp them at the clerk of the Commercial Court. According to Company Formation France, these are specialised accounting books that must be purchased at the Commercial Court or authorized stores.

Time: 1 day

Cost: 45 EUR

Liaison Office (bureau de liaison)

A.  Requirements/Restrictions

According to the Practical Law guide, a liaison office is an establishment located in France, for a purpose limited to promotion, advertising and seeking out business opportunities for the foreign parent company. Just Landed describes it as “essentially a ‘shop window’ set up by a foreign company.” A liaison office is not a separate entity from its parent company. Generally, a liaison office is used most commonly when foreign investors are only engaging with France on a short-term basis.

B.  Advantages/Disadvantages

The Practical Law guide reports that the advantages of a liaison office is that it is not subject to French accounting requirements, corporate income tax, VAT and territorial economic contribution (TEC).

The main disadvantages include the limit that restricts liaison offices from conducting commercial operations, and that it does not have status as a legal entity, which means that it cannot enter into agreements.

 

C.  Registration Steps

1.  Appoint a Representative

The branch generally will need a person entitled to act on behalf of the company. However, this is only if legal acts are performed such as signing lease agreements, etc, otherwise a representative need not be appointed.

The representative does not need to be separately ‘registered’, but needs to be formally decided upon within the company before registering the branch, with appropriate company declarations being made and signed.

For liaison offices the representative must be a resident of France.

Time: n/a

Cost: n/a

2.  Declaration of Existence

A declaration of existence should be made to the National Institute of Statistics and Economic Studies (INSEE), who will assign SIRET and SIREN numbers for the Liaison Office. The SIREN number, SIRET number and APE Code will allow a liaison office to recruit employees in France and sign agreements for utilities & telephone companies, as well as for registering a French Website address. The company will not need to register for VAT, however, council tax must be paid if the liaison office leases a premises in France, and social security contributions are required to be paid if employees are working for the liaison office.

The SEDI Group reports that, like a subsidiary or branch, the registration can be done at the CFE.  However, they note that if by error a tax code is allocated to the new representative office, it may be qualified as a Branch by default and become a taxable office. If such a case occurs it is necessary to contact the Tax Office & CFE to correct the mistake.

AngloInfo Paris also specifies that the CFE covers the following registrations:

  • INSEE, which registers the company with the Répertoire National des Entreprises (RNE) and allocates a SIREN number (business reference number used by French administrative offices) and a SIRET number (quoted in dealings with local social services, tax offices and unemployment office) and the NAF code (an activity code that classifies the type of business in France – also called APE number)
  • Tax services eg. payroll
  • Social security services (URSSAF, Régime Social des Indépendants (RSI), professionals’ pension scheme).
  • The Caisses Socials and Inspection du Travail if there are to be employees at the start of trade.

Time: 10-15 days

Cost: EUR 84.24

3.  Establish an Office

The branch must have an office arranged before it can register with the trade and companies register. According to the French Commercial Court, examples of suitable evidence include copy of the commercial lease, the contract with a company, recent electric bill (EDF) or telephone receipts, etc. These documents should be included when registering in the next step.

Time: no separate registration procedure (but paperwork for lease, etc may take several weeks)

Cost: no registration cost (deposit and agent fees etc will however apply)

4.  Open a Commercial Bank Account

A French bank account is not required for representative office, but still recommended. Even though a representative office is not a registered separate legal entity, if there is any trouble opening it under the liaison office itself, accounts can also be opened by non-residents.

Time: 1-8 days

Cost: no charge (aside from requiring a minimal deposit)

Outsourcing Employment Through a GEO Employer of Record Service

Outsourcing Employment Through Shield GEO

Whether to incorporate in France, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.

If the company intends to have staff in France they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities.  A GEO Employer of Record solution is an attractive alternative where

– the company is looking to setup an office quickly

– the company wants to work within a defined budget

– the company wants to limit its initial commitment in France

– the company needs help with tax, employment, immigration and payroll compliance in France

The complexity of employment regulations in France makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.

Shield GEO provides a comprehensive service in France allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in France.

Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into France. Read more about outsourced employment through Shield GEO.

Summary of Set Up Steps

Comp Branch Liaison Time Cost (EUR)
Appoint a Representative No Yes Yes
Check Name Availability Yes No No instant 0
Commercial Bank Account Yes Yes Yes 1-8 days 0
Establish an Office Yes Yes Yes 0
Register the Branch No Yes No 10-20 days 40
Declaration of Existence No No Yes 10-15 days 85
Appoint an Auditor Yes No No n/a n/a
Publication in Official Journal Yes No No 1 day 165
Register for Tax & Social Security Yes Yes No 10-15 days 85
Stamp Company Books Yes Yes No 1 day 45
 

TOTALS:

*applications and processing times, not including internal document preparation, lawyer fees, etc

 

Comp.

13-26 days

295EUR

 

Branch

14-31 days

170EUR

 

Liaison

10-15
days

85EUR

Conclusion

According to the Practical Law guide, locally incorporated subsidiary company is the most common company form used by foreign investors wishing to invest in France on a long-term basis. A branch is most commonly used when wishing to invest in France on a long-term basis and also keep a close eye on day-to-day management, since the branch has no independent legal personality. A liaison office is used when foreign investors are only engaging with France on a short-term basis.

 

APPENDIX (TERMINOLOGY)

English French
Activity code that classifies type of business (also called APE number) NAF (Nomenclature des Activitees Francaises)
Articles of association statuts
Branch office succursale
Center for tax, social security and labour insurances Centre de Formalités des Entreprises
Commercial Trade Register Registre de Commerce et des Sociétés
Company registration certification documents Extrait Kbis (K-bis)
Intellectual Property body Institut National de la Propriété Industrielle
Liaison Office (representative office) bureau de liaison
Limited liability single shareholder corporation Entreprise Unipersonelle à Responsibilité Limitée (EURL)
number is quoted in dealings with local social services, tax offices and ASSEDIC (state unemployment) SIRET (Systéme Informatique pour le Répertoire des Etablissements)
official journal of civil and commercial notices Bulletin Officiel D’Annonces Civiles et Commerciales
Private limited liability company societe a responsabilite limitee
private limited liability company societe a responsabilite limitee (SARL)
professionals’ pension scheme Régime Social des Indépendants (RSI)
Self-employed/sole trader Entreprise Individuelle (EI).
simplified joint-stock company société par actions simplifiée (SAS)
Subsidiary company Filiale
the business reference number used by French administrative offices. Systéme Informatique pour le Répertoire des Entreprises (SIRENE)
trademark épôt de marque
VAT number numéro de TVA intracommunautaire

 

 

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